What stocks are doing: The IBEX 35 index rallied 1.6% to 10,301.50. The Madrid benchmark was rebounding from a 0.9% loss on Tuesday, when concerns over an escalation in Spain’s political crisis blunted the appetite for investing.

The pan-European Stoxx Europe 600 index was flat at 390.16.

Spanish de-escalation: The upbeat tone for Spanish stocks came after Catalan President Carles Puigdemont spoke to the Catalan parliament late Tuesday. The separatist leader told lawmakers he still intends to declare independence for the Spanish region, but was suspending the secession process to allow negotiations with the central government in Madrid first.

The move is seen as cooling off the political crisis in Spain — considered the worst in four decades — and a step back from a potential split of the country. Spanish Prime Minister Mariano Rajoy will address the issue in a speech to the national parliament later on Wednesday.

“[He] will unlikely sound compliant with the Catalan independence plans. From a Spanish perspective, it is a fact that the Catalan government crossed the line by running a referendum that Spain qualified as illegal. Rajoy’s tone will matter. A strong opposition could escalate the crisis,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group, in a note.

How Spanish assets responded: Spanish banks were among biggest advancers in Europe after the independence talks were put on hold. Shares of Banco de Sabadell rose 2.2%, CaixaBank gained 2.1%, and Banco Santander climbed 1.1%.

The euro moved higher after Puigdemont’s speech on Tuesday evening local time and continued higher in Wednesday’s trade. The shared currency bought $1.1829, up from $1.1808 on Tuesday and $1.1743 on Monday.

The yield on 10-year Spanish government bonds fell four basis points to 1.651%, according to Tradeweb.

Eurozone news: Dutch finance minister Jeroen Dijsselbloem said he’ll leave domestic politics when a new government takes office on October 25. He will complete his term as president of the Eurogroup of eurozone finance ministers, which expires in January.

Stock movers: Shares of Mondi slid 8.2% after the packaging and paper group said underlying performance for the year is expected to be modestly below market expectations.

Gerresheimer put on 2.1% after a well-received earnings report.

Economic data: Spanish inflation in September fell to 1.8% from 1.9%, slightly missing forecasts of a 1.9% reading.

After the European markets close, the minutes from the US Federal Reserve’s September meeting are due. Monetary policy in the US is important to traders in Europe as it is a key driver for markets globally.